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Optimal Output for Short-Run Profit Maximization is Marginal Revenue = Marginal Cost

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Why is the optimal level of output for short-run profit maximization equal to that level where marginal revenue equals marginal cost? What is the mechanism that will push firms to this level of output?

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The expert discusses why the optimal level of output for short-run profit maximization is equal to the level where marginal revenue equals marginal cost

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In order to maximize profit, a company will set production at the quantity where marginal revenue equals marginal cost. Marginal revenue is the additional revenue a firm will receive from producing one additional good. Marginal cost is the additional cost a firm will ...

Solution provided by:
Robert Reinhart, MBA
Education
  • MBA, Merage School of Business, Univ of Cal, Irvine
  • BA, Univ of Cal, Irvine
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